What Is Amazon Product Laundering and How Can You Stop It?

We all love a good conspiracy theory. Well, here is a doozy. There is a scam online that I have coined “product laundering” and it is becoming a serious problem for Amazon businesses. This is a form of Amazon buyer fraud that is a direct risk to the health of your Amazon seller’s account.

It is impossible for me to quantify how often this is actually happening because most sellers are not on the lookout for it. Those who are looking out for it still have a hard time proving it. I believe it happens more than many people think (since many are completely unaware this happens), but please, don’t assume that all of your customer complaints are a result of corrupt buyers. Many sellers mess up their chances of reinstating ASINs or their accounts because they blame the buyers too much without proof. So, read what I am saying and keep it in mind as a possibility but not the norm or a common occurrence.

As a consultant, I always focus on what my client may have done first when they receive complaints before I start to dig deeper to find if there was any foul play involved.

Sellers are too quick to say things like, “It was a competitor trying to screw me!” or, “the customer just wanted free return shipping!” Yes, these things happen, but they are the exception, not the norm.

There is a more dangerous issue at hand now…Amazon buyer fraud, and in this case, product laundering.

What is Product Laundering

Here is a thread in the Amazon seller forum about product laundering. The discussion is about as professional as a hot dog vendor in a tube top, but you will see the point. Sellers suspecting buyers of defrauding them.

The company I consult/write for is eGrowth Partners (formerly OnlineSalesStepbyStep.com). Bookmark that page and come back to it if you ever have an ASIN or your account suspended. I write there about 10 hours per week, so you may be able to ask for me personally if you’d like.

Product laundering is a type of buyer fraud in which counterfeiters to exchange fake units for real ones. They can offload these knockoffs and receive authentic goods that they can then resell at huge profits.

These fraudulent buyers may or may not report that they received a counterfeit unit when they return it (the real jerks claim they received a counterfeit unit).

When they return the unit, it IS counterfeit, because they made it that way.

Pretty shitty right?

In some cases, the seller may just return the item and not mention anything other than something generic like “didn’t fit” or “not as described.” Then, legitimate buyers receive these items and are obviously very upset when they see they are knock offs.

Here is the concept more clearly…

Why Isn’t This Caught?

It is caught sometimes, but for the most part, it goes undetected and ends up becoming the seller’s problem.

Please understand this: Amazon does not do as good of a job at inspecting returns as you would yourself. Amazon is not going to properly check serial numbers, compare items to authentic ones or even know what an authentic version may look like.

Also, the best (we would say worst) counterfeiters are able to send products that could be shrink-wrapped or in some other sort of “tamper-proof” sealing that wouldn’t trigger any sort of cause for deeper inspection by Amazon associates. Amazon associates, after all, aren’t going to open a sealed package.

There is money in this, so it isn’t unrealistic to see some high-quality knock offs.

Who Is at the Greatest Risk of Being a Victim?

This could happen to any seller who sells someone else’s brand, but realistically, it is sellers of products that…

Sell for much more than the cost of the components. The products that are best fit for this scheme include:

Sell at higher prices. Buyers do get suspended on Amazon all the time, so they aren’t able to buy and return tons of different items each day. Higher grossing items are obviously a higher priority if the goal is to make real money in this scam.

What Can You Do?

I have good news and bad news. First, the good news…

The good news: There are some things you can do to prevent and identify product launderers.

The bad news: You can’t eliminate the risk entirely unless you sell ONLY your own branded products.

Step #1 Purchase from Quality Sources. In the event that you do get an inauthentic claim, Amazon is reasonable IF you have invoices. While seller performance is not ever a joy to work with, they do accept proper invoices as evidence that something was amiss.

But what is a “quality source?”

A good source should have:

A direct link to the manufacturer or IS the manufacturer. No liquidators, dear God.

Professional looking invoices. Excel documents don’t cut it folks, and you should really reconsider working with a supplier who isn’t professional enough to spend the 30 mins or $30 to create professional invoicing materials. Freshbooks is so affordable…

A purchase date that is within the past 180 days. The newer the better. Amazon is fairly strict on this. Some items they will let slide if you can prove the quantity is reasonable and the good is non-perishable. Also, if you received a claim on the 1st of the month, don’t send them an invoice dated some time after that! Many people don’t have proper invoices so they go to their supplier and ask for one to be cut for them and the date is that day. Not good. Very dumb. Don’t be dumb.

The name of the buyer that matches the name, address, and/or business on file with your storefront. Make sure that you are buying items consistently in the name of the business or business account owner.

Itemized lines showing product details clearly. Your invoices need to show the item in question. This could be with a clear title or UPC.

Quantities that match your in stock quantities.I have seen Amazon ignore this part to an extent, but it should be close.

As a bonus, annotate your images to highlight these attributes. You can use a free tool like Jingor Evernote’s “Skitch” for this. It isn’t hard if you spend a few minutes learning the software and I find it pays off tremendously.

Step #2 Take Control of Your Own Returns (if possible)

Watch your returns like a hawk. As I said, Amazon associates do NOT care about your returns half as much as you do… let me put this in quotes because it is so important.

Amazon associates do NOT care about your returns half as much as you do

So, if possible, have inventory shipped back to your location for inspection and/or destruction.

For higher end product returns, consider selling them on another medium of lesser importance to you like eBay if you can’t stomach donating or destroying it.

Step #3 Follow up with Buyers on Returns

When possible, reach out to customers who have returned items and ask for more information. Don’t be rude or accusative, simply explain you want to provide a quality experience for your customers and you want to know how you can do better next time.

Large sellers will struggle with reaching out to all returns, so you should prioritize returns on the high-risk items (mentioned above).

Step #4 Get to Know Your Own Products

You should be able to identify a real product from a knockoff on anything that you sell. Customers buying high-end goods will catch it, you should be able to as well.

If possible, compare to a control unit. Something you are absolutely certain is authentic. If you sell Coach purses, go to a Coach store sometime and scan the items and the subtle features that may be missed by counterfeiters. Note the location of tags, etc. etc.

You can also go online to the supplier’s website and review all available pictures of your items.

Other Types of Return Fraud

Refurbished for New Swap: The margins aren’t quite as high here, but sellers don’t have to have a counterfeiting connection to capitalize on this. I picture drug addicts and petty criminals doing this more than black market empires. The concept would be purchasing a broken or refurbished unit from one location (or one that the fraudster had on hand), buying a new one, reporting that they received a “used item” and sending back their crappy unit.

Wardrobing or renting: Purchasing merchandise for short-term use with the intent to return the item, such as a dress for a special occasion, a video camera for graduations and weddings or a big-screen television for the Super Bowl.

Nate McCallister

Nate is the founder and main contributor of EntreResource.com. He is a lifestyle entrepreneur who spends his time building businesses and raising his two kids Sawyer and Brooks with his beautiful wife Emily. His main interests include copywriting, economics and piano.